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This is the time to get in and start picking in a staggered manner because midcaps have still not come to the level they were
last year in January-February, said Arun Thukral, MD & CEO, Axis Securities, in an interview with ETNOW.

Edited excerpts:

Seems like after hitting that 11400 mark, there is a missed out feeling because 15 days back, no one thought we are going to see such a strong March rally. Should one profit take or is it time to go on buying this rise?

What we missed is the first two months where other Asian markets have rallied and we could not rally. This one is obviously a pre-election rally but there are other positive news on global front with trade negotiations going on between US and China. Then the market is factoring in a victory for the current regime and that is also a positive. Globally, US Fed is pausing and not going to raise interest rates very soon and even ECB is again talking about monetary easing. So, may be the risk-on sentiment has come back and we are catching up.

Do you think going forward banks would continue to bet on same horses -- ICICI Bank, Axis or HDFC? Or do you believe that one could see a leadership churn within banks?

Earlier, we were talking about banks with retail focus. Now, we are saying banks with retail as well as corporate focus and all major private banks are benefiting. Corporate bank is also benefiting because the NPA cycle is over and they have a good CASA franchise and they have to catch up. In last one odd years, they did not perform and all in all, these top two-three players will definitely benefit and others will follow. We are very bullish on the private banks space and within that banks with retail as well as corporate focus.

What you are making of the strength in the currency? How is this going to impact the IT sector?

Earlier, we were saying that after consumption, the second best sector for us was IT and pharma. Now the second best is shifted to the private banks. We are talking about the next level of that sector is IT and pharma because of the same reason. Because the rupee has appreciated very fast, it has gone from 72 to 69 and obviously there are a lot of FII flows coming in and to that extent you are right. There are some pressure on this thing but looking at the overall US economy, it appears the global spend on IT as well as pharma is going to go up. Also regulatory woes and pricing pressure have eased. Some pressure will be there, but they will continue to perform and medium to long term, we are bullish.

Given the kind of disappointment in auto numbers, would you be very selective and stick with some of the two-wheelers, some of the outperformers within the space?

We are neutral as of now on auto and auto ancillaries because the last results which we have seen were off the expectations and then the cost of raw materials went up and then the pain in the NBFC sector is also not helping either. There was a rate cut recently and going ahead, if there is another rate cut, the monsoon is better, maybe at that point of time we will look at auto and now even the crude oil prices are going up and that is a bit of worry. As of now we are neutral. We are not recommending.

We have seen the regulatory woes as well been coming in and that has really put a bit of pressure on the pharma space. A lot of these pharma companies quoting at very expensive valuations. What is you stand here?

Pharma has not performed well over last three to four years. Maybe a little bit of catching up is needed and the rupee tailwind is also helping as of now. Now they are getting into the complex molecules and other speciality drugs which they were not doing and the pricing pressure in the US which is earlier in double digit has now come down to single digit and almost stabilised.

Maybe that is going to help and the leaders will continue to do well but again this is medium to long term. In the immediate term, because of the rupee appreciation, there may not be a trading gain but medium to long term we are bullish on pharma sector.

Where else are you finding opportunities within the broader end of the market? Quite a few mid and smallcaps have actually recovered a good 40-50% odd from their year to date lows. Where within that spectrum do you find opportunities to invest in?

The first sector we are talking about is consumer durable and FMCG. The double digit growth in names like HUL, Dabur, Jubilant and other such companies, even the electrification in all the villages will help and a lot of white goods also will do well.

We are moving towards a $5-trillion economy and there is a huge penetration scope because there is low penetration whether you talk about air-conditioners or refrigerators and these kind of goods.

I think if there are good plays in even the mid and smallcap and if the quality is good, this is the time to get in and start picking at a staggered level because midcaps have still not come to that level where they were last year in January-February.

There are opportunities and maybe we are advising either to get good picks or get a good mutual fund midcap scheme. But yes, there are opportunities available in mid and smallcap at this point of time because once a good election result comes and a stable government is in place, the market is going to rally. Maybe this is the right time to go and accumulate those stories.

Could we see crude oil prices rise further? They are currently at about $67. Which sectors could be impacted?

Crude is a worry because of Saudi Arabia going for a production cut and despite US shale gas production having gone up because of the sanctions against Venezuela and Iran. Obviously, the aviation companies will suffer as will oil marketing companies if there is a subsidy burden and sectors where crude is used as a raw material. All those sectors are going to suffer. Obviously auto and auto ancillaries also will suffer. These are the areas which we will be watching carefully and there is definitely a genuine risk of crude price going up.